Worley Limited · ASX:WOR
Worley — H1 2019 Earnings Presentation
63 slides from Worley's earnings presentation, Feb 20, 2019
Slide 1: Half Year Results 2019
Half Year Results 2019 Andrew Wood, CEO Half year results 2019
Slide 2: Disclaimer
Disclaimer The information in this presentation about the WorleyParsons Group and its activities is current as at 20 February 2019 and should be read in conjunction with the Company’s Appendix 4D and Interim Financial Report for the half year ended 31 December 2018. It is in summary form and is not
Slide 3: HY2019 summary: Our strategy is delivering
HY2019 summary Our strategy is delivering. Improved financial performance ▪ Double digit revenue growth $2,566.2m $98.4m ▪ Improved EBIT and NPAT margins Aggregated revenue Underlying NPAT +11.1% growth from PCP +25.8% growth from PCP Balance sheet de-risked ▪ New USD1.3b syndicated facility agreeme
Slide 4: HY2019 achievements
Overview HY2019 achievements ▪ Aggregated revenue growth, driven by construction services and UK IS acquisition ▪ EBIT and NPAT growth, with higher margins Financial results ▪ Completed $2.9b acquisition capital raising for Jacobs ECR acquisition ▪ New USD1.3b Syndicated Facility Agreement in place
Slide 5: Revenue and EBIT growth
Aggregated revenue and underlying EBIT Revenue and EBIT growth Half on half revenue Half on half underlying EBIT AUD'M H1 H2 AUD'M H1 H2 4,000.0 200.0 166 3,107 150 153 156 140 3,000.0 2,619 2,566 150.0 133 2,310 2,439 118 2,166 2,211 2,000.0 100.0 1,000.0 50.0 0.0 0.0 FY2016 FY2017 FY2018 FY2019 FY
Slide 6: Backlog growth
Backlog growth 36 month backlog ($b) Approximate timing of backlog ($b) 7.0 Backlog as at 31 December 2018 6.5 FY19 2.3 6.0 5.5 FY20 2.4 5.0 6.4 6.6 4.5 6.0 4.0 5.1 FY21 1.6 4.7 3.5 3.0 FY22 0.3 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 ▪ Second consecutive year of +10% backlog growth (in addition to the c
Slide 7: Pace of awards has increased
ASX announced contract awards in FY19 Pace of awards has increased 5 17 6 3 8 14 2 Hydrocarbons ▪ Increase in recent ASX 11 16 Power announced wins providing 1 4 12 early positions in next 7 Minerals and metals wave of investment ▪ Broad geographic, sector Chemicals and project phase 18 representati
Slide 8: UK Integrated Solutions
UK Integrated Solutions Acquisition update 8 Half year results 2019
Slide 9: UK Integrated Solutions – example revenue synergy
UK Integrated Solutions – example revenue synergy New Zealand – BP WorleyParsons Joint Venture Joint venture with BP for the management & operations of seven fuel storage, handling and Contract scope distribution centres, plus an associated projects & engineering management contract UK Integrated So
Slide 10: UK Integrated Solutions – example revenue synergy
UK Integrated Solutions – example revenue synergy Nigeria - Confidential IOC Client Full construction services including field engineering, procurement, construction & logistics Contract Scope management for offshore facilities UK Integrated Solutions brings… WorleyParsons Nigeria JV (DeltaTek) brin
Slide 11: UK Integrated Solutions – example revenue synergy
UK Integrated Solutions – example revenue synergy AGT BP Chirag Gas Lift Project FEED (Azerbaijan, Georgia, Turkey) Bringing the best of local country knowledge and experience, with the required expertise, tools and Contract Scope systems of a leading brownfield execution provider (UKIS) for a large
Slide 12: Health Safety and Environment
Health Safety and Environment Our safety performance ▪ Employee Total Recordable Case Frequency Rate (TRCFR) at December 2018 was 0.10) (June 2018: 0.12) ▪ Employee, Contractor & Subcontractor and Partner TRCFR at December 2018 was 0.14 (June 2018: 0.15) The Group’s HSE Committee focus areas for FY2
Slide 13: Responsible business at WorleyParsons
Responsible business at WorleyParsons We have always taken a responsible and sustainable approach to our business. This year we have: ▪ delivered community social impact with a network of 30+ 26% 40% champions and the WorleyParsons Foundation Active Senior Executives Board members WorleyParsons are
Slide 14: New Operating Structure
Jacobs ECR Acquisition New Operating Structure Chief Executive Officer Andrew Wood Chief Operating Officer Chief Financial Officer Chris Ashton Tom Honan Advisian Energy & Chemicals Major Projects and Mining, Minerals & Metals Services Integrated Solutions Services President Group President Group Pr
Slide 15: Half Year Results 2019 – Tom Honan, CFO
Half Year Results 2019 Tom Honan, CFO 15 Half year results 2019
Slide 16: Statutory statement of financial performance
Statutory statement of financial performance 31 December 2018 31 December 2017 ($m) ($m) REVENUE AND OTHER INCOME Professional services revenue 1,943.4 1,913.4 Procurement revenue 318.6 204.2 Construction and fabrication revenue 371.0 286.6 Interest income 10.5 2.8 Other income 2.2 2.4 Total revenue
Slide 17: Reconciliation of statutory to underlying NPAT
Reconciliation of statutory to underlying NPAT result Adjusted for non-trading items HY2019($m) HY2018($m) Statutory result 82.4 1.4 Add: impact of acquisitions, comprised of: Acquisition costs 12.2 5.9 Bridging facility fee 4.2 - Interest on term deposits (7.5) - FX gain on term deposits (3.4) - 1
Slide 18: HY2019 key financials
HY2019 key financials Statutory result HY2019 HY2018 vs. HY2018 ▪ Statutory and aggregated revenue increased Total revenue ($m) 2,645.7 2,409.4 9.8% due to professional services revenue in UKIS EBIT ($m) 133.9 109.3 22.5% and construction revenue Net Profit After Tax ($m) 82.4 1.4 n/m ▪ Improved und
Slide 19: Segment result by business line
Segment result By business line H1 2019 H1 2018 vs. H1 2018 ▪ Growth in Major Projects and Integrated Solutions Aggregated Revenue ($m) 2,566.2 2,310.1 11.1% (MP&IS) due to a strong performance in Norway Services 1,273.2 1,215.8 4.7% and a full period of UK IS Major Projects and Integrated Solutions
Slide 20: Headcount growing: staff utilization on target
Headcount growing: staff utilization on target Growth in global Growth headcount in global headcount Staff Utilization Headcount Total Headcount Change from Prior Month 90% 88% Utilisation % 86% 84% 82% Target Monthly rate 80% July Jan July Jan July Jan 14 15 15 16 16 17 78% Apr-15 Sep-15 Feb-16 Jul
Slide 21: Key operating indicators
Key operating indicators Operating Leverage Operating Leverage EBIT Margin % 7.0% Overheads ($) Revenue ($) 6.5% 6.0% 5.5% Revenue Overhead 5.0% 4.5% 4.0% HY17 FY17 HY18 FY18 HY19 FY15 HY16 FY16 HY17 FY17 HY18 FY18 HY19 ▪ Cost out program is proving sustainable with revenue growth NPAT Margin % ▪ Ma
Slide 22: Capital management
Half Year Results 2019 Capital management 22 Half year results 2019
Slide 23: Cash flow, net debt and balance sheet
Cash flow, net debt and balance sheet Continuing focus Free Cash Flow Gearing Ratio* % 300 35% 30% 200 25% 100 20% Gearing ratio = net debt/net debt 15% 0 + equity HY16 FY16 HY17 FY17 HY18 FY18 HY19 10% HY16 FY16 HY17 FY17 HY18 FY18 HY19 -100 m$ Net Debt* * 1,000 3.5 3.0 800 2.5 2.0 600 1.5 1.0 400
Slide 24: Balance sheet metrics
Gearing metrics Balance sheet metrics ▪ Gearing at low end of target band of 25-35% HY2019 FY2018 Gearing ratio1 % (71.0%) 23.0% ▪ Statutory balance sheet impacted by proceeds of Gearing ratio2 % 25.7% 23.0% capital raising to fund completion of Jacobs ECR Facility utilization3 % 27.6% 60.1% transac
Slide 25: Core facility refinanced
Liquidity Core facility refinanced ▪ The refinance has been completed with improved terms compared to the previous facility agreement ▪ The Syndicated Facility Agreement (“SFA”) provides a foundation to deliver strategy through ▪ Refinancing the syndicated bank debt facility which was due to mature
Slide 26: Core facility refinanced
Liquidity Core facility refinanced ▪ Core debt facility refinanced during FY19. 1,800 New facility consists of USD500 million 1,600 multi-currency revolving facility and USD800 million term loans maturing in February 2024 1,400 1,200 ▪ The refinance was over subscribed and includes a mix of existing
Slide 27: Jacobs ECR – Acquisition Update
Jacobs ECR – Acquisition Update Chris Ashton, COO 27 Half year results 2019
Slide 28: The acquisition of Jacobs ECR drives our growth plan across all three horizons
The acquisition of Jacobs ECR drives our growth plan across all three horizons ▪ Our clear focus is to merge the operations of the two companies, deliver our strategy and achieve the cost, margin and revenue synergies 28 Half year results 2019
Slide 29: Delivering significant benefits to WorleyParsons’ shareholders
Delivering significant benefits to WorleyParsons’ shareholders In combining two complementary organisations, the transaction: 1 Generates material EPS accretion and returns for shareholders 2 Creates a pre-eminent global provider of professional project and asset services in resources and energy 3 P
Slide 30: Global sector leadership across Hydrocarbons, Chemicals and Minerals & Metals
Global sector leadership across Hydrocarbons, Chemicals and Minerals & Metals ENR Hydrocarbons global design rankings1 ENR Chemicals global design rankings1 ENR Metals & Mining sector global design (upstream only) (includes Petrochemicals & Refining) rankings1 MergeCo MergeCo #1 #2 #2 MergeCo Worley
Slide 31: Jacobs ECR acquisition progress - Summary
Jacobs ECR acquisition progress - Summary Activities Progress Achievements • US, Canada, EU received Regulatory approvals • Pending RSA competition approvals and CFIUS • Cost synergies validated Cost • Implementation planning underway and on track Synergy Realization Margin and • Margin and revenue
Slide 32: The transition journey to a new company
The transition journey to a new company Day 1 2018 2019 2020 Separation Transition Transformation 32 Half year results 2019
Slide 33: Significant value upside through cost synergies
Significant value upside through cost synergies $130m cost synergies expected to deliver benefits within 2 years Estimated A$130m Cost synergies p.a. cost synergies within 2 years ▪ License scale discount, management and support rationalization, IT infrastructure rationalization, vendor support rati
Slide 34: Example Revenue Synergy opportunities
Example Revenue Synergy opportunities Hydrocarbons (upstream and midstream) Complete offshore Bringing together Jacobs ECR specialist offerings including floating topsides and construction offering in the Gulf capability with WorleyParsons capabilities in subsea and hook-up and commissioning of Mexi
Slide 35: Example Revenue Synergy opportunities
Example Revenue Synergy opportunities Downstream and Chemicals Full project Combining the extensive front-end and FEED capability of Jacobs ECR with WorleyParsons world class delivery offering in PMC capability to service proposed large scale integrated refining and petrochemicals projects in Asia a
Slide 36: Example Revenue Synergy opportunities
Example Revenue Synergy opportunities Mining, Minerals and Metals Complete deep Combining Jacobs ECR’s strong capability in underground material handling and mineral processing with underground WorleyParsons comprehensive experience in mine planning and mine development as well as specialist shaft m
Slide 37: Sector Update
Sector Update 37 Half year results 2019
Slide 38: Electrification to accelerate
Global Energy Transition Electrification to accelerate Change in global energy demand, 2017-2040 ▪ Energy mix transformation Renewables & nuclear Gas Oil continues to accelerate towards Mtoe 1500 electrification 1200 Nuclear Other ▪ Global power demand to rise 60% 900 Renewables 600 Power Other ▪ Re
Slide 39: Improving Market Outlook
Hydrocarbons Improving Market Outlook Select Oil & Gas majors – global capex YoY growth (%) 10% 8% 5% 4% 4% Despite the volatility in the market due to 0% geopolitical uncertainties, customer earnings (10%) and spending continue to grow (20%) (23%) Upstream: Investments are predicted to grow ~10% (3
Slide 40: Chemicals & Downstream - earnings diversification and resilience
Chemicals & Downstream - earnings diversification and resilience A step change in exposure to the stable and expanding chemicals and downstream markets WorleyParsons pre-acquisition MergeCo pro forma ▪ Chemicals capital expenditure displays limited 11% cyclicality: The industry is underpinned by con
Slide 41: Return to investment
Minerals & Metals Return to investment Global Mining capital expenditure Global copper market balance (Kt) top 15 global miners (by market capitalization) $60 Surplus Billions ($AUD) $50 $40 $30 Deficit $20 $10 $- 2017 2018 2019 Source: Newmont, Investor Presentation, May 2018 Global steel demand gr
Slide 42: Outlook
Outlook Andrew Wood, CEO 42 Half year results 2019
Slide 43: Progress in HY2019
Concluding remarks Progress in HY2019 ▪ Revenue* up 11.1%, EBIT* up 17.6%, NPAT* up 25.8% ▪ Operating leverage continues ▪ Backlog increased ▪ Increase in pace of ASX announced awards has continued into FY2019 ▪ Integration of UK IS acquisition exceeding expectations ▪ On track for expected completi
Slide 44: Jacobs ECR delivers enhanced earnings diversification and resilience
Jacobs ECR delivers enhanced earnings diversification and resilience … with all sectors indicating medium term growth Highlights Chemicals annual global capex ✓ 2019 Chemicals capex continuing long term growth trend ✓ 2019 Hydrocarbons capex >35% below 2013 peaks … and below longer term market low p
Slide 45: Group outlook
Group outlook Driven by continued improvement in market conditions, our resources and energy customers are increasing early phase activity for the next cycle of investment. This is reflected in the recent level of contract awards and our growing backlog. By maintaining our focus and growing our posi
Slide 46: Q&A
Half Year Results 2019 Q&A 46 Half year results 2019
Slide 47: Supplementary information
Half Year Results 2019 Supplementary information 47 Half year results 2019
Slide 48: Segment result by region
Segment result By region By region H1 2019 H1 2018 vs. H1 2018 ▪ Revenue growth in APAC supported by Aggregated Revenue ($m) NZ, SEA and China, offset by Australia 2,566.2 2,310.1 11.1% West. The Operational EBIT decrease is APAC 584.3 558.7 4.6% driven by Australia West offset with EMEA 1,192.9 938
Slide 49: Segment result by sector
Segment result By sector H1 2019 H1 2018 vs. H1 2018 ▪ Hydrocarbons revenue increase from UK IS, Aggregated Revenue ($m) 2,566.2 2,310.1 11.1% Norway, and Canada West partially offset by Hydrocarbons 1,949.7 1,725.7 13.0% lower revenues in the US, Cord and parts of Professional Services ¹ 1,578.7 1,
Slide 50: Global operations and employee numbers
Global operations and employee numbers 26,910 people 115 42 offices countries 50 Half year results 2019
Slide 51: Backlog increased
Backlog increased Backlog by region Backlog by sector as at 31 December 2018 as at 31 December 2018 1.3 0.6 Australia, Pacific, Hydrocarbons Asia, China (APAC) 1.1 2.9 Minerals, Metals & Americas (AM) Chemicals Europe, Middle East, Infrastructure 4.9 2.4 Africa (EMEA) 51 Half year results 2019
Slide 52: Backlog increased
Backlog increased Backlog by region Backlog by sector as at 31 December 2018 as at 31 December 2018 8.0 0.2 0.1 0.1 0.7 0.4 7.0 7.0 0.1 6.0 6.0 5.0 5.0 A$'B 4.0 A$'B 4.0 6.4 6.4 6.6 6.6 3.0 3.0 2.0 2.0 1.0 1.0 - - 52 Half year results 2019
Slide 53: Underlying earnings profile
Underlying earnings profile Group Underlying EBIT $m H2 H1 418.0 302.7 298.8 237.2 257.8 152.5 165.9 139.9 180.8 150.2 132.9 156.3 117.9 FY2015 FY2016 FY2017 FY2018 FY2019 Group Underlying NPAT $m H2 H1 243.1 153.1 171.4 138.8 123.2 79.2 93.2 66.1 104.3 73.9 78.2 98.4 57.1 FY2015 FY2016 FY2017 FY201
Slide 54: Margin profile
Margin profile Operational Underlying EBIT % H1 6.8% 5.8% 6.3% 6.3% 6.5% 5.9% 5.8% 6.1% H2 5.0% 5.8% 5.3% 5.4% 4.8% Total FY2015 FY2016 (Restated) FY2017 FY2018 FY2019 Operational Underlying NPAT % H1 3.8% 3.8% 3.6% 3.8% 3.4% 3.4% H2 2.9% 3.0% 3.0% 2.8% 2.7% 2.6% 2.4% Total 54 FY2015 FY2016 (Restate
Slide 55: Revenue split
Revenue split Contribution to aggregated revenue (%) Sector aggregated revenue (%) 10% Middle East & Africa, ANZ, 17% 16% 14% Hydrocarbons Asia, 6% Minerals, Metals & Chemicals Infrastructure Europe, 29% USA & LAM, 15% 76% Canada, 16% 55 Half year results 2019
Slide 56: Revenue reconciliation
Revenue reconciliation HY2019 ($m) HY2018($m) vs HY2018 Revenue and other income 2,645.7 2,409.4 9.8% Plus: Impact of the arbitration award1 8.7 - n/m Less: Procurement revenue at nil margin (136.9) (43.7) 213.3% Less: Pass through revenue at nil margin (36.9) (138.8) (73.4%) Plus: Share of revenue
Slide 57: EBIT reconciliation
EBIT reconciliation HY2019 ($m) HY2018 ($m) EBIT 133.9 109.3 Add: impact of acquisitions, comprised of: Acquisition costs 12.2 5.9 Bridging facility fee 4.2 - FX gain on term deposit (3.4) - Add: impact of the arbitration award1 8.7 Add: restructuring costs 0.7 5.5 Add: onerous lease contracts - 12.
Slide 58: Cash flow
Cash flow HY2019 ($m) HY2018 ($m) EBIT 133.9 109.3 Add: Depreciation, amortization 31.8 36.6 Less: Interest and tax paid (23.9) (40.2) Less: Working capital/other (120.8) (61.4) Net cash inflow from operating activities 21.0 44.3 Non-recurring costs paid less interest income received 3.5 25.7 Underl
Slide 59: Liquidity and debt maturity
Liquidity and debt maturity Liquidity Summary $m HY2019 FY2018 Change Liquidity (excluding impact of equity raise in HY2019) Loan, finance lease & overdraft facilities1 2,373 1,677 41.5% Less: facilities utilized 2 (1,178) (1,008) 16.9% Available facilities 1,195 669 78.6% Plus: cash3 343 282 21.6%
Slide 60: Foreign exchange translation impact
Foreign exchange translation impact Movement in major currencies against AUD (indexed) Average exchange Spot exchange rate Currency 115 rate movement movement 110 BRL 12.7% (4.3%) 105 CAD (3.4%) (1.8%) 100 CNY (4.1%) (1.1%) 95 EUR (5.2%) (3.6%) 90 GBP (5.6%) (1.3%) 85 NOK (3.8%) 2.4% 80 SGD (6.1%) 4
Slide 61: Foreign exchange
Foreign exchange Impact total EBIT 1.5 1.0 0.5 0.9 0.3 0.2 0.7 0.9 0.2 0.2 0.6 0.7 0.1 0.3 0.0 (0.4) (0.1) -0.5 A $m -1.0 (2.2) -1.5 (3.2) -2.0 -2.5 -3.0 -3.5 CAD CNY EUR GBP KWD KZT NOK NZD QAR US Pegged USD ZAR BGN TRY OTHER Group EBIT FX translation 15 10 11 12 5 0.1 0 (8.3) (0.8) -5 -10 FY15 FY1
Slide 62: Acronyms
Acronyms ADNOC - Abu Dhabi National Oil Company FY – Financial Year APAC – Australia, Pacific, Asia, China HSE – Health Safety and Environment AM – Americas HY – Half Year ASX - Australian Securities Exchange IFRS - International Financial Reporting Standards CPS – Cents Per Share IS – Integrated So
Slide 63: WorleyParsons
WorleyParsons resources & energy